The President is expected to sign today a $484 billion interim bill providing additional funding for Paycheck Protection Program (PPP) small business loans, hospitals and testing, turning the focus toward a larger CARES 2/COVID 4 measure that could take shape in coming weeks. Yesterday's House vote was remarkable not because of the final result — it passed 388-5 — but because of the protracted process of voting in groups and because of most members and staff wearing masks on the floor.

The WCEY Alert on the Paycheck Protection Program and Health Care Enhancement Act (H.R. 266) is here.

The debate over a CARES 2/COVID 4 is unfolding amid some of the sharpest policy differences over the coronavirus response. Senate Majority Leader Mitch McConnell (R-KY) has signaled wariness to act further because of the budgetary impact of the $2.7 trillion in revenue already spent, and apparent conservative opposition to additional state and local aid, with suspicions that it could be applied toward pre-crisis pension shortfalls and amount to a 'blue state bailout.' His comment that he would "certainly be in favor of allowing states to use the bankruptcy route" angered governors of both parties, including Andrew Cuomo (D-NY), who said yesterday, "You want to see the economy in this nation suffer in a way that it won't come back for years? Let states declare bankruptcy. I mean, from an economic point of view it was bizarre."

Concerns over the cost of the next package do not seem to be shared by the Administration. The Treasury Secretary, Steven Mnuchin, said on Fox Business April 22 "we need to spend what it takes to win the war," and US tolls of the war have reached 50,000 dead and 26 million unemployed over five weeks. President Trump would not comment on the controversy over state and local funding and potential for bankruptcies during his regular briefing last evening — "I don't want to talk about it now" — but he has called for more state and local funding, in addition to infrastructure investments, a payroll tax cut and tax incentives for restaurants, entertainment and sports. More specifically, there is bipartisan interest on issues like boosting broadband infrastructure and allowing employers to suspend worker payroll tax withholding. Politico reported that a third plank of interest for the Administration is policies, including on taxes, that would help bring manufacturing back from China.

A story in today's Wall Street Journal reported House Speaker Nancy Pelosi (D-CA) as saying Democrats will prioritize money for state, local and tribal governments, funding for food-aid programs and worker-safety regulations, as well as a push to send more money directly to many Americans.

Congress isn't expected to return for normal business until May 4, and Senator McConnell said he indeed expects to reconvene the Senate then. It remains to be seen whether the PPP may need another cash injection sooner than a fourth package can be assembled. Senator Marco Rubio (R-FL) tweeted this morning that the program should be relaunching Monday morning with "not just the $310 billion [the President] will sign today," but also an additional significant amount of money from loans "being returned by several publicly traded large companies."

Implementation

Yesterday, the Joint Committee on Taxation staff revised its revenue estimate of the CARES Act "modification of limitation on losses for taxpayers other than corporations" provision downward by about $35 billion, from $170 billion to $135 billion over 10 years, and newly showed the provision raising revenue after 2021.

Rep. Lloyd Doggett (D-TX), a frequent critic of the corporate tax system, introduced a bill (H.R. 6579) to reverse the provision, which extends the bill's NOL relief to passthroughs and sole proprietors by allowing losses under IRC Section 461 for tax years before 2021.

Also yesterday, the Small Business Administration updated its guidance on the PPP to clarify that participating borrowers must certify in good faith that "current economic uncertainty makes this loan request necessary to support the ongoing operations of the applicant." The new guidance is intended to address questions raised by the fact that several larger companies such as restaurant and hotel chains were approved for forgivable PPP loans during the program's first weeks, before its funding ran out last week, while large numbers of smaller companies were unable to secure loans.

The Internal Revenue Service has posted new Frequently Asked Questions (FAQs) about Carrybacks of Net Operating Losses (NOLs) for Taxpayers who have had IRC Section 965 Inclusions, as a follow-up to the material on temporary procedures issued last week.

EY Alerts and other resources are here.

The global EY Tax COVID-19 Response Tracker has been updated through April 22.

Today, April 24 at 12:00 p.m., is the EY Webcast, "Tax in the time of COVID-19: How the pandemic is affecting the economy, compliance and transfer pricing." Events like the spread of the coronavirus (COVID-19) have made reacting to trade disputes and continued implementation of the Tax Cuts and Jobs Act much more difficult. This week's panelists will explore: (i) Legislative update and the state of the economy; (ii) What the economic downturn means for transfer pricing; (iii) NOL carrybacks: the significance of the IRS revoking Revenue Ruling 71-533 which addressed the special 10-year statute of limitations for claims for refund or credit related to foreign tax credits; and (iv) The latest compliance updates from the IRS. Register

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